Shares of Mahanagar Gas Ltd (MGL) have surged 16.72 per cent so far this year. The stock settled 8.80 per cent higher at Rs 986.35 on Monday after touching an intraday high — also its 52-week high — of Rs 990. The sharp movement in the share price came as the firm inked a pact to buy rival private sector city gas distributor Unison Enviro from its promoters and existing shareholders, Ashoka Buildcon, and an investment fund managed by Morgan Stanley India Infrastructure.
ICICI Securities has given a ‘Buy’ call on the counter with a target price of Rs 1,125 over a one-year period.
“Mahanagar Gas has announced its first inorganic acquisition in the CGD (City Gas Distribution) space, Unison Enviro. It has acquired a 100 per cent stake in the fledgling CGD player and has stated Unison equity value at Rs 530 crore, which implies an enterprise value of around Rs 640 crore (gross debt on the books of Unison as of FY22, stood at Rs 113 crore). The transaction value implies a price/sales multiple of 8.3x and EV/EBITDA of 3,128x,” the brokerage stated.
“We sense the acquired areas can add a meaningful NPV (Net present value) of Rs 500 crore for MGL (around Rs 50 per share). We view this as a significant move forward to address longstanding concerns on growth avenues for MGL beyond the Mumbai Metropolitan Region (MMR). Reiterate Buy,” it added.
ICICI Securities cited higher gas prices, inability to pass on gas cost increases, sharp fall in alternate fuel prices for CNG (petrol/diesel) and slower execution as key downside risks.
That said, the brokerage listed higher penetration in existing areas, sharper rise in alternate fuel costs and stronger regulatory support as key upside risks.
Kotak Institutional Equities has assigned a ‘Buy’ rating on the counter while pegging the MGL at a fair value of Rs 1,080.
Mahanagar Gas has an average target price of Rs 1,033, Trendlyne data showed, suggesting a potential upside of 4.77 per cent. The scrip has a one-year beta of 0.91, indicating low volatility.
The stock traded higher than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter’s 14-day relative strength index (RSI) came at 73. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company’s stock has a price-to-equity (P/E) ratio of 14.92.
Meanwhile, Indian equity benchmarks would be closed today due to ‘Holi’.
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